Throughout its history, the REIT industry has been a marketplace in motion, changing with the ongoing economic, technological, and social changes in our world. That ongoing change is well-illustrated by the story in this issue commemorating the 50th anniversary of the FTSE Nareit Indexes.
The first Nareit REIT index was a broad market index of 34 U.S. REITs with a total equity market capitalization of $1.5 billion. It was a far cry from today's FTSE Nareit All REITs Index with more than 200 REITs and a total $1.6 trillion in equity market capitalization.
But it is more than size that distinguishes today’s REIT industry from its predecessor 50 years ago. The first REIT index was nearly evenly divided between equity, mortgage, and hybrid REITs. By comparison, $1.5 trillion of the current FTSE Nareit All REITs Index’s equity market cap comes from equity REITs.
And, unlike the index in its early years when equity REITs were made up primarily of office, industrial, residential, and retail REITs, today’s index represents companies that serve a broad spectrum of the sectors that make up today's economy.
That includes the sectors that serve the 21st century economy. In 2000, the REIT industrial sector and communications towers had a combined equity market capitalization of just over $15 billion, representing 11.6% of the FTSE Nareit All Equity REITs Index. And the data centers sector didn't yet exist.
At the end of last year, the industrial, infrastructure, and data centers sectors together had an equity market capitalization of $645 billion, making up 39% of the index’s total value. REITs today are the most effective way that investors of all sizes can invest in 21st century real estate.
The evolution of the REIT industry, however, has been about more than just the changing composition of its assets. There has been change, as well, in the way that the industry manages its assets. One of the most important aspects of that change is the REIT industry's rapidly increasing focus on ESG.
Public disclosure is a key element of a corporate ESG commitment. In 2020, of the 100 largest equity REITs, 98 made public disclosures of their ESG programs and practices. That was an increase from 60 REITs just three years earlier.
REITs are making strides in the social component of ESG, as well, with programs for employees, tenants, and communities. Diversity, equity, and inclusion are key objectives for any company, and REITs are making real progress in this critical area. In 2020, 98% of REITs reporting to the global ESG tracking organization GRESB said they monitor inclusion and diversity metrics at the board and workforce levels, while 68% of REITs reporting to GRESB said they had policies in place for recruiting and hiring a more diverse workforce.
REITs are a dynamic industry, moving forward to better serve all of their stakeholders. You can read more about our REIT marketplace's continuing progress in the stories in this issue of REIT magazine.
Marguerite Nader
2022 Nareit Chair
President & CEO
Equity Lifestyle Properties, Inc.